-- risks of war and civil disturbances or other events that may limit or disrupt markets; -- dependence on regulatory and third-party approvals; -- changes in rating or outlooks assigned to our foreign subsidiaries by rating agencies; -- challenges in attracting and retaining key foreign-based employees, customers and business partners in international markets; -- foreign governments'' monetary policies and regulatory requirements; -- economic downturns in targeted foreign mortgage origination markets; -- interest-rate volatility in a variety of countries; -- the burdens of complying with a wide variety of foreign regulations and laws, some of which may be materially different than the regulatory and statutory requirements we face in our domestic business, and which may change unexpectedly; -- potentially adverse tax consequences; -- restrictions on the repatriation of earnings; -- foreign currency exchange rate fluctuations; and -- the need to develop and market products appropriate to the various foreign markets.
Any one or more of the risks listed above could limit or prohibit us from developing our international operations profitably. In addition, we may not be able to effectively manage new operations or successfully integrate them into our existing operations.
Downgrades in the financial strength ratings of MGIC below Aa3 (or its
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equivalent) could have a material adverse affect on us. -------------------------------------------------------
The financial strength ratings of our wholly owned subsidiary Mortgage Guaranty Insurance Corporation ("MGIC") are ''AA-'' (Standard & Poors Rating Services), ''Aa2'' (Moody''s Investors Service) and ''AA'' (Fitch Ratings). Fitch Ratings has announced that its rating is under review with negative implications. In assigning financial strength ratings, in addition to considering the adequacy of the mortgage insurer''s capital to withstand extreme loss scenarios under assumptions determined by the rating agency, rating agencies review a mortgage insurer''s historical and projected operating performance, business outlook, competitive position, management, corporate strategy, and other factors. We believe a financial strength rating of at least Aa3/AA- is critical to a mortgage insurer''s ability to continue to write new business. Any downgrade below such level could have a material adverse affect on us.
Our income from our Sherman joint venture could be adversely affected by
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competition or other factors affecting its business. ----------------------------------------------------
Sherman Financial Group LLC ("Sherman") is engaged in the business of purchasing and servicing delinquent consumer assets, and in originating and servicing subprime credit card receivables. Sherman''s results are sensitive to its ability to purchase receivable portfolios on terms that it projects will meet its return targets. While the volume of charged-off consumer receivables and the portion of these receivables that have been sold to third parties such as Sherman has grown in recent years, there is an increasing amount of competition to purchase such portfolios, including from new entrants to the industry, which has resulted in increases in the prices at which portfolios can be purchased.
Source: MGIC Investment Corporation
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